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Corruption runs against the grain of meritocratic capitalism. It
skews the level playing-field; it imposes onerous and unpredictable transaction
costs; it guarantees extra returns where none should have been had; it
encourages the misallocation of economic resources; and it subverts the proper
functioning of institutions. It is, in other words, without a single redeeming
feature, a scourge.

Strangely, this is not how it is perceived by
its perpetrators: both the givers and the recipients. They believe that
corruption helps facilitate the flow and exchange of goods and services in
hopelessly clogged and dysfunctional systems and markets (corruption and the informal economy "get
things done" and "keep people employed"); that it serves as an
organizing principle where chaos reins and institutions are in their early
formative stages; that it supplements income and thus helps the state employ
qualified and skilled personnel; and that it preserves peace and harmony by
financing networks of cronyism, nepotism, and patronage.

Bribes are paid in order to limit choice and
eliminate competition. Consequently, in corrupt environments consumers pay less
than optimal prices. The difference between the competitive price and the new,
post-corruption cost equals the amount of bribe paid in cash or in kind.
Corruption amounts to a unilateral transfer from the consumers's pockets to the
manufacturers's. In times of economic crisis, consumers tend to shop around (in
other words: they prefer price competition and encourage it via their
behavior). Producers/manufacturers tend to collude in order to fix prices. In
recessions, businesses regard consumers as enemies and vice versa:
producer-firms court consumers, but they also seek to limit their choices by
"channelling" their purchases and determining their preferences.

I. The Facts

In 2002, just days before a much-awaited
donor conference, the influential International Crisis Group (ICG) recommended
to place all funds pledged to Macedonia under the oversight of a
"corruption advisor" appointed by the European Commission. The donors
ignored this and other recommendations. To appease the critics, the affable
Attorney General of Macedonia charged a former Minister of Defense with abuse
of duty for allegedly having channeled millions of DM to his relatives during
the recent civil war. Macedonia has belatedly passed an anti-money laundering
law recently, but failed, yet again, to adopt strict anti-corruption
legislation.

In Albania, the Chairman of the Albanian
Socialist Party, Fatos Nano, was accused by Albanian media of laundering $1
billion through the Albanian government. Pavel Borodin, the former chief of
Kremlin Property, decided not appeal his money laundering conviction in a Swiss
court. The Slovak daily "Sme" described in scathing detail the newly
acquired wealth and lavish lifestyles of formerly impoverished HZDS
politicians. Some of them now reside in refurbished castles. Others have
swimming pools replete with wine bars.

Pavlo Lazarenko, a former Ukrainian prime
minister, is detained in San Francisco on money laundering charges. His defense
team accuses the US authorities of "selective prosecution".

They are quoted by Radio Free Europe as
saying:

"The impetus for this prosecution comes from allegations made by
the Kuchma regime, which itself is corrupt and dedicated to using undemocratic
and repressive methods to stifle political opposition ... (other Ukrainian
officials) including Kuchma himself and his closest associates, have committed
conduct similar to that with which Lazarenko is charged but have not been
prosecuted by the U.S. government".

The UNDP estimated, in 1997, that, even in
rich, industrialized, countries, 15% of all firms had to pay bribes. The figure
rises to 40% in Asia and 60% in Russia.

Corruption is rife and all pervasive, though
many allegations are nothing but political mud-slinging. Luckily, in countries
like Macedonia, it is confined to its rapacious elites: its politicians,
managers, university professors, medical doctors, judges, journalists, and top
bureaucrats. The police and customs are hopelessly compromised. Yet, one rarely
comes across graft and venality in daily life. There are no false detentions
(as in Russia), spurious traffic tickets (as in Latin America), or widespread
stealthy payments for public goods and services (as in Africa).

It is widely accepted that corruption retards
growth by deterring foreign investment and encouraging brain drain. It leads to
the misallocation of economic resources and distorts competition. It depletes
the affected country's endowments - both natural and acquired. It demolishes
the tenuous trust between citizen and state. It casts civil and government
institutions in doubt, tarnishes the entire political class, and, thus,
endangers the democratic system and the rule of law, property rights included.

This is why both governments and business
show a growing commitment to tackling it. According to Transparency
International's "Global Corruption Report 2001", corruption has been
successfully contained in private banking and the diamond trade, for instance.

Hence also the involvement of the World Bank
and the IMF in fighting corruption. Both institutions are increasingly
concerned with poverty reduction through economic growth and development. The
World Bank estimates that corruption reduces the growth rate of an affected
country by 0.5 to 1 percent annually. Graft amounts to an increase in the
marginal tax rate and has pernicious effects on inward investment as well.

The World Bank has appointed in 2001 a
Director of Institutional Integrity - a new department that combines the
Anti-Corruption and Fraud Investigations Unit and the Office of Business Ethics
and Integrity. The Bank helps countries to fight corruption by providing them
with technical assistance, educational programs, and lending.

Anti-corruption projects are an integral part
of every Country Assistance Strategy (CAS). The Bank also supports
international efforts to reduce corruption by sponsoring conferences and the
exchange of information. It collaborates closely with Transparency
International, for instance.

At the request of member-governments (such as
Bosnia-Herzegovina and Romania) it has prepared detailed country corruption
surveys covering both the public and the private sectors. Together with the
EBRD, it publishes a corruption survey of 3000 firms in 22 transition countries
(BEEPS - Business Environment and Enterprise Performance Survey). It has even
set up a multilingual hotline for whistleblowers.

The IMF made corruption an integral part of
its country evaluation process. It suspended arrangements with endemically
corrupt recipients of IMF financing. Since 1997, it has introduced policies
regarding misreporting, abuse of IMF funds, monitoring the use of debt relief
for poverty reduction, data dissemination, legal and judicial reform, fiscal
and monetary transparency, and even internal governance (e.g., financial
disclosure by staff members).

Yet, no one seems to agree on a universal
definition of corruption. What amounts to venality in one culture (Sweden) is
considered no more than hospitality, or an expression of gratitude, in another
(France, or Italy). Corruption is discussed freely and forgivingly in one place
- but concealed shamefully in another. Corruption, like other crimes, is
probably seriously under-reported and under-penalized.

Moreover, bribing officials is often the
unstated policy of multinationals, foreign investors, and expatriates. Many of
them believe that it is inevitable if one is to expedite matters or secure a
beneficial outcome. Rich world governments turn a blind eye, even where laws
against such practices are extant and strict.

In his address to the Inter-American
Development Bank on March 14, 2002 President Bush promised to "reward
nations that root out corruption" within the framework of the Millennium
Challenge Account initiative. The USA has pioneered global anti-corruption
campaigns and is a signatory to the 1996 IAS Inter-American Convention against
Corruption, the Council of Europe's Criminal Law Convention on Corruption, and
the OECD's 1997 anti-bribery convention. The USA has had a comprehensive
"Foreign Corrupt Practices Act" since 1977.

The Act applies to all American firms, to all
firms - including foreign ones - traded in an American stock exchange, and to
bribery on American territory by foreign and American firms alike. It outlaws
the payment of bribes to foreign officials, political parties, party officials,
and political candidates in foreign countries. A similar law has now been
adopted by Britain.

Yet, "The Economist" reports that
the American SEC has brought only three cases against listed companies until
1997. The US Department of Justice brought another 30 cases. Britain has
persecuted successfully only one of its officials for overseas bribery since
1889. In the Netherlands bribery is tax deductible. Transparency International
now publishes a name and shame Bribery Payers Index to complement its
91-country strong Corruption Perceptions Index.

Many rich world corporations and wealthy
individuals make use of off-shore havens or "special purpose
entities" to launder money, make illicit payments, avoid or evade taxes,
and conceal assets or liabilities. According to Swiss authorities, more than
$40 billion are held by Russians in its banking system alone. The figure may be
5 to 10 times higher in the tax havens of the United Kingdom.

In a survey it conducted in February 2002 of
82 companies in which it invests, "Friends, Ivory, and Sime" found
that only a quarter had clear anti-corruption management and accountability
systems in place.

Tellingly only 35 countries signed the 1997
OECD "Convention on Combating Bribery of Foreign Public Officials in
International Business Transactions" - including four non-OECD members:
Chile, Argentina, Bulgaria, and Brazil. The convention has been in force since
February 1999 and is only one of many OECD anti-corruption drives, among which
are SIGMA (Support for Improvement in Governance and Management in Central and
Eastern European countries), ACN (Anti-Corruption Network for Transition
Economies in Europe), and FATF (the Financial Action Task Force on Money
Laundering).

Moreover, The moral authority of those who
preach against corruption in poor countries - the officials of the IMF, the
World Bank, the EU, the OECD - is strained by their ostentatious lifestyle,
conspicuous consumption, and "pragmatic" morality.

II. What to Do? What is Being Done?

A few years ago, I proposed a taxonomy of
corruption, venality, and graft. I suggested this cumulative definition:

The withholding of a service,
information, or goods that, by law, and by right, should have been
provided or divulged.

The provision of a service,
information, or goods that, by law, and by right, should not have been
provided or divulged.

That the withholding or the
provision of said service, information, or goods are in the power of the
withholder or the provider to withhold or to provide AND That the
withholding or the provision of said service, information, or goods
constitute an integral and substantial part of the authority or the
function of the withholder or the provider.

That the service,
information, or goods that are provided or divulged are provided or
divulged against a benefit or the promise of a benefit from the recipient
and as a result of the receipt of this specific benefit or the promise to
receive such benefit.

That the service,
information, or goods that are withheld are withheld because no benefit
was provided or promised by the recipient.

There is also what the World Bank calls
"State Capture" defined thus:

"The actions of individuals, groups, or firms, both in the public
and private sectors, to influence the formation of laws, regulations, decrees,
and other government policies to their own advantage as a result of the illicit
and non-transparent provision of private benefits to public officials."

We can classify corrupt and venal behaviors
according to their outcomes:

Income Supplement - Corrupt actions whose sole outcome is the
supplementing of the income of the provider without affecting the
"real world" in any manner.

Acceleration or
Facilitation Fees - Corrupt
practices whose sole outcome is to accelerate or facilitate decision
making, the provision of goods and services or the divulging of
information.

Decision Altering (State
Capture) Fees - Bribes and
promises of bribes which alter decisions or affect them, or which affect
the formation of policies, laws, regulations, or decrees beneficial to the
bribing entity or person.

Information Altering
Fees - Backhanders and bribes
that subvert the flow of true and complete information within a society or
an economic unit (for instance, by selling professional diplomas,
certificates, or permits).

Reallocation Fees - Benefits paid (mainly to politicians and
political decision makers) in order to affect the allocation of economic
resources and material wealth or the rights thereto. Concessions,
licenses, permits, assets privatized, tenders awarded are all subject to
reallocation fees.

To eradicate corruption, one must tackle both
giver and taker.

History shows that all effective programs
shared these common elements:

a.The persecution of
corrupt, high-profile, public figures, multinationals, and institutions
(domestic and foreign). This demonstrates that no one is above the law and that
crime does not pay.

b.The conditioning of
international aid, credits, and investments on a monitored reduction in
corruption levels. The structural roots of corruption should be tackled rather
than merely its symptoms.

c.The institution of
incentives to avoid corruption, such as a higher pay, the fostering of civic
pride, "good behavior" bonuses, alternative income and pension plans,
and so on.

d.In many new
countries (in Asia, Africa, and Eastern Europe) the very concepts of
"private" versus "public" property are fuzzy and impermissible
behaviors are not clearly demarcated. Massive investments in education of the
public and of state officials are required.

e.Liberalization and
deregulation of the economy. Abolition of red tape, licensing, protectionism,
capital controls, monopolies, discretionary, non-public, procurement. Greater
access to information and a public debate intended to foster a
"stakeholder society".

f.Strengthening of
institutions: the police, the customs, the courts, the government, its
agencies, the tax authorities - under time limited foreign management and
supervision.

Awareness to corruption and graft is growing
- though it mostly results in lip service. The Global Coalition for Africa
adopted anti-corruption guidelines in 1999. The otherwise opaque Asia Pacific
Economic Cooperation (APEC) forum is now championing transparency and good
governance. The UN is promoting its pet convention against corruption.

The G-8 asked its Lyon Group of senior
experts on transnational crime to recommend ways to fight corruption related to
large money flows and money laundering. The USA and the Netherlands hosted
global forums on corruption - as did South Korea in 2003. The OSCE has
responded with its own initiative, in collaboration with the US Congressional
Helsinki Commission.

The south-eastern Europe Stability Pact
sports its own Stability Pact Anti-corruption Initiative (SPAI). It held its
first conference in September 2001 in Croatia. More than 1200 delegates
participated in the 10th International Anti-Corruption Conference in Prague last
year. The conference was attended by the Czech prime minister, the Mexican
president, and the head of the Interpol.

The most potent remedy against corruption is
sunshine - free, accessible, and available information disseminated and probed
by an active opposition, uncompromised press, and assertive civic organizations
and NGO's. In the absence of these, the fight against official avarice and
criminality is doomed to failure. With them, it stands a chance.

Corruption can never be entirely eliminated -
but it can be restrained and its effects confined. The cooperation of good
people with trustworthy institutions is indispensable. Corruption can be
defeated only from the inside, though with plenty of outside help. It is a
process of self-redemption and self-transformation. It is the real transition.

III. Asset Confiscation and Asset
Forfeiture

The abuse of asset confiscation and
forfeiture statutes by governments, law enforcement agencies, and political appointees
and cronies throughout the world is well-documented. In many developing
countries and countries in transition, assets confiscated from real and alleged
criminals and tax evaders are sold in fake auctions to party hacks, cronies,
police officers, tax inspectors, and relatives of prominent politicians at
bargain basement prices.

That the assets of suspects in grave crimes
and corruption should be frozen or "disrupted" until they are
convicted or exonerated by the courts - having exhausted their appeals - is
understandable and in accordance with the Vienna Convention. But there is no
justification for the seizure and sale of property otherwise.

In Switzerland, financial institutions are
obliged to automatically freeze suspect transactions for a period of five days,
subject to the review of an investigative judge. In France, the Financial
Intelligence Unit can freeze funds involved in a reported suspicious
transaction by administrative fiat. In both jurisdictions, the fast track
freezing of assets has proven to be a more than adequate measure to cope with
organized crime and venality.

The presumption of innocence must fully apply
and due process upheld to prevent self-enrichment and corrupt dealings with
confiscated property, including the unethical and unseemly use of the proceeds
from the sale of forfeited assets to close gaping holes in strained state and
municipal budgets.

In the United States, according to The Civil
Asset Forfeiture Reform Act of 2000 (HR 1658), the assets of suspects under
investigation and of criminals convicted of a variety of more than 400 minor
and major offenses (from soliciting a prostitute to gambling and from narcotics
charges to corruption and tax evasion) are often confiscated and forfeited
("in personam, or value-based confiscation").

Technically and theoretically, assets can be
impounded or forfeited and disposed of even in hitherto minor Federal civil
offenses (mistakes in fulfilling Medicare or tax return forms)

The UK's Assets Recovery Agency (ARA) that is
in charge of enforcing the Proceeds of Crime Act 2002, had this chilling
statement to make on May 24, 2007:

“We are pursuing the assets of those involved in a
wide range of crime including drug dealing, people trafficking, fraud,
extortion, smuggling, control of prostitution, counterfeiting, benefit fraud,
tax evasion and environmental crimes such as illegal dumping of waste and
illegal fishing." (!)

Drug dealing and illegal fishing in the same
sentence.

The British firm Bentley-Jennison, who
provide Forensic Accounting Services, add:

"In some cases the
defendants will even have their assets seized at the start of an investigation,
before any charges have been considered. In many cases the authorities will assume
that all of the assets held by the defendant are illegally obtained as he has a
“criminal lifestyle”. It is then down to the defendant to prove otherwise. If
the defendant is judged to have a criminal lifestyle then it will be assumed
that physical assets, such as properties and motor vehicles, have been acquired
through the use of criminal funds and it will be necessary to present evidence
to contradict this.

The defendant’s bank accounts will also be scanned for evidence of
spending and any expenditure on unidentified assets (and in some cases
identified assets) is also likely to be included as alleged criminal benefit.
This often leads to the inclusion of sums from legitimate sources and double
counting both of which need to be eliminated."

Under the influence of the post-September 11
United States and the FATF (Financial Action Task Force on Money Laundering),
Canada, Australia, the United Kingdom, Greece, South Korea, and Russia have
similar asset recovery and money laundering laws in place.

International treaties (for instance, the
1959 European Convention on Mutual Legal Assistance in Criminal Matters, the
1990 Convention of the Council of Europe on Laundering, Search, Seizure and
Confiscation of the Proceeds from Crime (ETS 141), and The U.N. Convention
against Corruption 2003- UNCAC) and European Union Directives (e.g.,
2001/97/EC) allow the seizure and confiscation of the assets and
"unexplained wealth" of criminals and suspects globally, even if
their alleged or proven crime does not constitute an offense where they own
property or have bank accounts.

This abrogation of the principle of dual
criminality sometimes leads to serious violations of human and civil rights.
Hitler could have used it to ask the United Kingdom's Assets Recovery Agency
(ARA) to confiscate the property of refugee Jews who committed
"crimes" by infringing on the infamous Nuremberg race laws.

Only offshore tax havens, such as Andorra,
Antigua, Aruba, the British Virgin Islands, Guernsey, Monaco, the Netherlands
Antilles, Samoa, St. Vincent, the US Virgin Islands, and Vanuatu still resist
the pressure to join in the efforts to trace and seize suspects' assets and
bank accounts in the absence of a conviction or even charges.

Even worse, unlike in other criminal
proceedings, the burden of proof is on the defendant who has to demonstrate
that the source of the funds used to purchase the confiscated or forfeited
assets is legal. When the defendant fails to furnish such evidence conclusively
and convincingly, or if he has left the United States or had died, the assets
are sold at an auction and the proceeds usually revert to various law
enforcement agencies, to the government's budget, or to good social causes and
programs. This is the case in many countries, including United Kingdom, United
States, Germany, France, Hong Kong, Italy, Denmark, Belgium, Austria, Greece,
Ireland, New Zealand, Singapore and Switzerland.

According to a brief written by Jack Smith,
Mark Pieth, and Guillermo Jorge at the Basel Institute on Governance, International
Centre for Asset Recovery:

"Article 54(1)(c) of the UNCAC recommends that states parties
establish non-criminal systems of confiscation, which have several advantages
for recovery actions: the standard of evidence is lower (“preponderance of the evidence”
rather than “beyond a reasonable doubt”); they are not subject to some of the
more restrictive traditional safeguards of international cooperation such as
the offense for which the defendant is accused has to be a crime in the
receiving state (dual criminality); and it opens more formal avenues for
negotiation and settlements. This is already the practice in some jurisdictions
such as the US, Ireland, the UK, Italy, Colombia, Slovenia, and South Africa,
as well as some Australian and Canadian States."

In most countries, including the United
Kingdom, the United States, Austria, Germany, Indonesia, Macedonia, and
Ireland, assets can be impounded, confiscated, frozen, forfeited, and even sold
prior to and without any criminal conviction.

In Australia, Austria, Ireland, Hong-Kong,
New Zealand, Singapore, United Kingdom, South Africa, United States and the
Netherlands alleged and suspected criminals, their family members, friends,
employees, and partners can be stripped of their assets even for crimes they
have committed in other countries and even if they have merely made use of
revenues obtained from illicit activities (this is called "in rem, or
property-based confiscation"). This often gives rise to cases of double
jeopardy.

Typically, the defendant is notified of the
impending forfeiture or confiscation of his or her assets and has recourse to a
hearing within the relevant law enforcement agency and also to the courts. If
he or she can prove "substantial harm" to life and business, the property
may be released to be used, though ownership is rarely restored.

When the process of asset confiscation or
asset forfeiture is initiated, banking secrecy is automatically lifted and the
government indemnifies the banks for any damage they may suffer for disclosing
confidential information about their clients' accounts.

In many countries from South Korea to Greece,
lawyer-client privilege is largely waived. The same requirements of monitoring
of clients' activities and reporting to the authorities apply to credit and
financial institutions, venture capital firms, tax advisers, accountants, and
notaries.

Elsewhere, there are some other worrying
developments:

In Bulgaria, the assets of tax evaders have
recently begun to be confiscated and turned over to the National Revenue Agency
and the State Receivables Collection Agency. Property is confiscated even when
the tax assessment is disputed in the courts. The Agency cannot, however,
confiscatesingle-dwelling houses, bank
accounts up to 250 leva of one member of the family, salary or pension up to
250 leva a month, social care, and alimony, support money or allowances.

Venezuela has recently reformed its Organic
Tax Code to allow for:

" (P)re-judgment enforcement measures (to) include closure of
premises for up to ten days and confiscation of merchandise. These measures
will be applied in addition to the attachment or sequestration of personal
property and the prohibition against alienation or encumbrance of realty.
During closure of premises, the employer must continue to pay workers, thereby
avoiding an appeal for constitutional protection."

Finally, in many states in the United States,
"community responsibility" statutes require of owners of legal
businesses to "abate crime" by openly fighting it themselves. If they
fail to tackle the criminals in their neighborhood, the police can seize and
sell their property, including their apartments and cars. The proceeds from
such sales accrue to the local municipality.

In New-York City, the police confiscated a restaurant
because one of its regular patrons was an alleged drug dealer. In Alabama,
police seized the home of a senior citizen because her yard was used, without
her consent, for drug dealing. In Maryland, the police confiscated a family's
home and converted it into a retreat for its officers, having mailed one of the
occupants a package of marijuana.

Most politicians bend the laws of the land
and steal money or solicit bribes because they need the funds to support
networks of patronage. Others do it in order to reward their nearest and
dearest or to maintain a lavish lifestyle when their political lives are over.

But these mundane reasons fail to explain why
some officeholders go on a rampage and binge on endless quantities of lucre.
All rationales crumble in the face of a Mobutu Sese Seko or a Saddam Hussein or
a Ferdinand Marcos who absconded with billions of US dollars from the coffers
of Zaire, Iraq, and the Philippines, respectively.

These inconceivable dollops of hard cash and
valuables often remain stashed and untouched, moldering in bank accounts and
safes in Western banks. They serve no purpose, either political or economic.
But they do fulfill a psychological need. These hoards are not the megalomaniacal
equivalents of savings accounts. Rather they are of the nature of compulsive
collections.

Erstwhile president of Sierra Leone, Momoh,
amassed hundreds of video players and other consumer goods in vast rooms in his
mansion. As electricity supply was intermittent at best, his was a curious
choice. He used to sit among these relics of his cupidity, fondling and
counting them insatiably.

While Momoh relished things with shiny
buttons, people like Sese Seko, Hussein, and Marcos drooled over money. The
ever-heightening mountains of greenbacks in their vaults soothed them, filled
them with confidence, regulated their sense of self-worth, and served as a love
substitute. The balances in their bulging bank accounts were of no practical
import or intent. They merely catered to their psychopathology.

These politicos were not only crooks but also
kleptomaniacs. They could no more stop thieving than Hitler could stop
murdering. Venality was an integral part of their psychological makeup.

Kleptomania is about acting out. It is a
compensatory act. Politics is a drab, uninspiring, unintelligent, and, often
humiliating business. It is also risky and rather arbitrary. It involves
enormous stress and unceasing conflict. Politicians with mental health disorders
(for instance, narcissists
or psychopaths)
react by decompensation. They rob the state and coerce businessmen to grease
their palms because it makes them feel better, it helps them to repress their
mounting fears and frustrations, and to restore their psychodynamic
equilibrium. These politicians and bureaucrats "let off steam" by
looting.

Kleptomaniacs fail to resist or control the
impulse to steal, even if they have no use for the booty. According to the Diagnostic and
Statistical Manual IV-TR (2000), the bible of psychiatry, kleptomaniacs
feel "pleasure, gratification, or relief when committing the theft."
The good book proceeds to say that " ... (T)he individual may hoard the
stolen objects ...".

As most kleptomaniac politicians are also psychopaths,
they rarely feel remorse or fear the consequences of their misdeeds. But this
only makes them more culpable and dangerous.

Transparency International’s Corruption
Perceptions Index

Like many other an NGO (non-governmental organization)
Berlin-based Transparency International (TI) is mainly preoccupied with
perpetuating itself and its raison d’etre. This it accomplishes by making three
highly questionable claims: (1) that its main product, the Corruption
Perceptions Index (CPI) is a reliable proxy for actual corruption; (2) that
corruption cannot be measured in any other reliable way or method; and (3) that
corruption is always wrong and undesirable, regardless of circumstances.

Here I will deal with the first claim. I have
dealt with the other two elsewhere.

The CPI, as its name makes abundantly clear,
is not about corruption per se, but about the perception of corruption in
various countries and by a variety of economic agents. Alas, as human history
repeatedly demonstrates, perceptions and reality are often bitterly divorced.
This is because perceptions are relative; easily manipulable; subjective; and
culture-bound.

Start with relative: as corruption decreases
in one place, it automatically appears elevated by comparison elsewhere. The
CPI, therefore, provides merely a relative ranking of countries which teaches
us close to nothing about venal happenings on the ground. Moreover: it is easy
to manipulate perceptions with clever public relations campaigns and spin
doctoring. An example in case is Macedonia: corruption there is as
all-pervasive as pernicious as ever – but the government’s trumpeted
self-imputed “successes” in fighting it have reversed the country’s erstwhile
tarnished image. Now, the CPI outlandishly lumps Macedonia together with
Latvia, Hungary, and the Czech Republic, three members of the European Union whose
corruption is dimensions away from the malversations of Macedonia’s
criminalized kleptocracies.

The ever-shifting methodology of the CPI
makes a multi-annual analysis of its data all but impossible. Corruption is a
fluid concept: practices once considered criminal are often legalized and
conduct deemed inappropriate in one culture or society is expected and
socially-condoned in another.

The CPI relies on interviews with businessmen
and analysts carried out by TI’s local chapters. There are two problems here.
The first: the quality of TI’s personnel and volunteers varies widely. Consider
Macedonia’s: TI’s local affiliate disintegrated in an acrimonious and
internecine squabble involving charges and counter-charges of fraud and worse.
The country now has two rival organizations proudly boasting the name
Transparency International (though TI itself recognizes only one of them). The
second problem is that in small countries such as Macedonia and even Israel the
business community and public intellectuals are dependent on the regime: they
are in bed with power and potential power and maintain an incestuous
relationship with ruling and opposition parties alike. This colours their input
and judgement, to put it mildly. In many cases, the contributors to the compilation
of the CPI are the very purveyors of the corrupt acts which they are supposed
to report impartially.

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